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Option Spreads

An option spread is created when one option is purchased and another is sold simultaneously.  The two options typically have different strike prices or expiration dates, and the trader who placed the spread order only has to come up with the cash difference between the option being bought and the one being sold.  An option spread generally has a lower degree of risk and maximum profit potential than the outright purchase or sale of a single option.

Credit Spreads

Debit Spreads

Vertical Spreads

Iron Condor

Terry's Tips Stock Options Trading Blog

September 26, 2014

How to Handle an Option Assignment

Yesterday, the SVXY put we had sold in our ongoing demonstration portfolio was exercised. While this is sort of an inconvenience to contend with, it will give us a learning opportunity. People with little or no options trading experience are often concerned that something awful happens when an option they have sold is exercised. This week’s experience should put their mind at ease.

Every Friday, we will make a trade in this portfolio and tell you about it here. Our goal is to earn an average gain of 3% a week in this portfolio after commissions.

I hope you find this ongoing demonstration to be a simple way to learn a whole lot about trading options.

Terry

How to Handle an Option Assignment

Yesterday SVXY fell over $5 a share as the market tanked and options volatility . . .

September 19, 2014

Ongoing SVXY Spread Strategy – Week 6

Today we will continue our discussion of both SVXY and the actual portfolio we are carrying out with only two positions. Every Friday, we will make a trade in this portfolio and tell you about it here.

Our goal is to earn an average gain of 3% a week in this portfolio after commissions. So far, we are well ahead of this goal.

I hope you find this ongoing demonstration to be a simple way to learn a whole lot about trading options. We will also discuss another Greek measure today – gamma.

Terry

Ongoing SVXY Spread Strategy – Week 6

Near the open today, SVXY was trading about $89.00. We want to sell a put that is about $1 in the money (i.e., at a strike one dollar higher than the current stock price). Our maximum gain each week will come if we are right, and the stock ends the week very close to the strike of our short put.

Here is the trade we placed today:. . .

September 12, 2014

Ongoing SVXY Spread Strategy – Week 5

Today we will continue our discussion of both SVXY and the actual portfolio we are carrying out with only two positions. Every Friday, we will make a trade in this portfolio and tell you about it here.

Our goal is to earn an average gain of 3% a week in this portfolio after commissions. So far, we are well ahead of this goal.

I hope you find this ongoing demonstration to be a simple way to learn a whole lot about trading options. We will also discuss some other options concepts today,

Terry

Ongoing SVXY Spread Strategy – Week 5

Near the open today, SVXY was trading about $86. We want to sell a put that is about $1 in the money (i.e., at a strike one dollar higher than the current stock price). Our maximum gain each week will come if we are right, and . . .

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